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October 26, 2010

What Service Providers Can Learn from Newspapers, Part Two

By Jon Arnold, Principal, J Arnold & Associates

In my last column, I touched on a few ideas around how newspapers and service providers face similar challenges, and I’ll resume that thought stream with one of them. Namely - the idea that news and telephony are basically in the same boat. Both are indispensible aspects of daily life, but the underlying economics, as well as the very essence of each are being fundamentally challenged – transformed, really – by the Internet. Short of undertaking a major overhaul, service providers and newspaper publishers are doomed to fail in the digital world that is rapidly redefining everything that we do.

My article talked about how the Toronto-based Globe and Mail has recently gone through a re-design, and that there’s a lot to like here about how a newspaper can reinvent itself. More importantly, I see a number of takeaways that I think can translate well for service providers, and I’d like to explore a few of those here.

As mentioned earlier, content is at the heart of this issue. When the core asset – whether it’s the news or telephony – becomes a commodity, you either compete for the lowest denominator or you find ways to leverage the new technology to create value that didn’t exist before. The former scenario is a painful race to zero where subscribers simply become end users and the underlying product has no real value. For the most part, traditional newspapers are competing against a mushrooming onslaught of free dailies targeted at commuters, as well as a decline in advertising which has been steadily migrating elsewhere. The “news” now comes in so many flavors and is available at whatever frequency you desire that the newspaper has lost its primacy for a growing portion of subscribers.

The telephony scenario is no different, and we all know how disruptive VoIP has been to the service provider status quo. Coming back to content, the end game is the same for both businesses – how to add value. To do that, the Globe and Mail has had to re-think their business from the ground up, and I’d like to touch on three aspects of this from their relaunch.

First, of course, is content. They’ve taken a step back and recognized that newspapers do not provide real value in the digital world by delivering news. Most “news” is old by the time we read the paper, and in many cases, we’ve already got the stories from the Web, TV, radio and even social media. To get beyond this, the Globe and Mail is focusing on insight and expert analysis. Whereas many newspapers are laying off staff, the Globe is investing in its reporting corps. Their people aren’t going after news – they’re going after the story – with the conviction that quality content trumps free headlines any day.

Not only that, but the scope of coverage has been expanded to include a richer focus on personal lifestyle topics – health, wellness, relationships, travel – things that connect us to each other. Newspapers have always done these things to varying degrees, but always in a vacuum. The Globe is doing this as a way to differentiate from all the lightweight clutter that is devaluing newspapers as a trusted brand.

Secondly, they have improved the physical product itself. I briefly mentioned in the last article how they’ve added color to every section, as well as more sophisticated graphics to explain complicated ideas. The paper stock is richer and some sections even have eye-catching glossy paper, which advertisers highly value. Reading the paper is more enjoyable, thanks to a new font, new layouts to present stories, and even a more compact broadsheet format. Arguably, it now looks more like a slimmed down free paper for commuters, but this is clearly a superior-looking product. Underlying all this is their investment in special printing presses from Germany that allow them to produce a high quality newspaper in a very efficient manner. Even if there was no change to the core content of the Globe, the upgraded quality goes a long way to retaining its value in a very challenging environment.

Third is the end user experience. They know that the physical newspaper is not the total end product. To remain relevant, the Globe must adapt to changing behaviors, and they have long been a leader in developing their online brand. Some subscribers only read the paper, but for a growing proportion, the website is an important part of the overall Globe experience. Free newspapers cannot compete with this, and as New York Times readers can attest, the online edition has become a key – and for some the primary – component of the value proposition. This reality is equally true, by the way, for advertisers. The rich media offered by the website is very attractive for advertisers, especially when coupled with the reader demographics that come with an established – and highly coveted - subscriber base such as the Globe’s.

I like to think of this third example in musical terms by comparing LPs to CDs. When CDs came out, issues around production cost, song length, album length, etc., went away, and this opened up many new possibilities for recorded music. In essence, the Globe has made a similar transition by getting beyond the confines of the traditional broadsheet format and broadening the ways they can connect with readers and deliver meaningful content.

All of the above examples have been addressed by the Globe in a fairly short amount of time. In my view, they have demonstrated what needs to be done to adapt in a changing world. To varying degrees, service providers have done some of these things, but they have a long way to go. Thinking of the first example – content – carriers are heading in the right direction with Unified Communications (News - Alert). Voice itself – POTS – has declining value for carriers, but when integrated with the multimedia applications for UC, new value is created. This is where service providers need to go, especially with their business customers – but look how long this is taking.

The second example – quality – is also being addressed by service providers for voice. In this regard I’m referring to HD audio, which is clearly a better quality product than TDM. There is no doubt that this adds value to voice, but again, carriers have been slow to adopt.

Finally, the third example – end user experience – comes down to integrating voice with the Web. This is the world of Web services, mashups, social media, mobile smartphone apps, etc. Ultimately, this points to the adoption of cloud-based communications, which is only just starting to gain traction. This trend will carry the day, and it’s moving quickly, but we’re still in the early adopter stage.

I could take this analysis further, but hopefully these comparisons will suffice. The main point here is that the tools exist today for service providers to reinvent themselves, but for a variety of reasons, they have been slow to move – at least when compared to what the Globe has done. Newspapers are big, old school businesses too, so I don’t see that as a mitigating factor here. Perhaps telcos haven’t felt enough pain yet, but I think it has more to do with vision and culture. That’s a story unto itself, and perhaps I’ll address that in another column. To conclude, I’ll simply say that I think the Globe has shown a lot of vision and understanding as to what their relationship with readers really means, and if telcos could move half as fast, they’d have a whole lot less to worry about.